Which of the following is an explanation for the negative slope of the aggregate demand curve?
A) because as prices rise nominal income falls and so does the demand for real goods and services
B) because as prices rise government spends less to drive the price level back down
C) because businesses increase spending when inflation is high and rising
D) because as prices rise domestic goods become more expensive relative to foreign goods, which reduces exports

Question

Which of the following is an explanation for the negative slope of the aggregate demand curve?  
A) because as prices rise nominal income falls and so does the demand for real goods and services 
B) because as prices rise government spends less to drive the price level back down 
C) because businesses increase spending when inflation is high and rising 
D) because as prices rise domestic goods become more expensive relative to foreign goods, which reduces exports

Quizplus · Accepted Answer

As prices rise, domestic goods become more expensive relative to foreign goods, which reduces exports. This leads to a decrease in overall aggregate demand.

Which of the Following Is an Explanation for the Negative